Netflix has announced a successful crackdown on password sharing after announcing that nearly 6 million people signed up during the second quarter of 2023.
Netflix reported 5.9 million new paid customers for the period ending June 30, 2023, beating expectations. Netflix will be happy with the figure, so it will come as a disappointment to those who were expecting the streaming giant to back down on its password-sharing crackdown.
Netflix is also dropping its Basic plan – the cheapest ad-free option – in the US and UK. The streaming giant is thought to be using this move to encourage people to opt out of the ad-supported option instead.
“[We are] now offering 95% content parity globally (via views), more streams and improved video quality on our ad plan, we’re partnering with Nielsen and EDO to improve measurement and innovation for advertisers,” Netflix said in its shareholder letter.
Netflix collects a lot of data about users. This helps it identify when a password is being used by more than one person through location indicators and will no doubt be useful for advertising.
Crackdown on Netflix Password Sharing
Netflix is implementing the new password sharing measures via emails to account holders. While it may seem like the crackdown is working, Netflix’s revenue was slightly lower than expected, suggesting that the new strategy may not be enough to compete with the new breed of streaming giants like Disney.
As a result shares in Netflix fell 8% on Thursday, according to Diversity, said: “Revenue for Q2 came in at $8.19 billion, shy of Wall Street consensus expectations of $8.3 billion. And Netflix’s guidance for Q3 revenue of $8.52 billion was less than analysts’ average forecast of $8.9 billion.”
However, Netflix itself was confident: “We expect revenue growth to accelerate in the second half of 2023 as we begin to see the full benefits of paid sharing as well as continued steady growth in our ad-supported plan,” the shareholder letter said. “We are still targeting a full-year 2023 operating margin of 18% to 20%,” the streaming giant said.
According to Netflix, additional member accounts are not included in its paid membership count but add revenue that is included in its “average revenue per member.”
“Although we are still in the early stages of monetization, we are seeing a healthy conversion of borrower families into full paying Netflix memberships as well as acceptance of our additional member feature,” the shareholder letter said.
Netflix is continuing its crackdown in other countries that have not yet implemented the new strategy. “In these markets, we are not offering an additional member option since we have recently cut prices in many of these countries (for example, Indonesia, Croatia, Kenya, and India) and penetration is still relatively low in many of them so we have plenty of runway without creating additional complexity,” Netflix said, adding that families “getting Netflix” will be able to transfer existing profiles to new and existing accounts.
Many people are unhappy with Netflix’s crackdown on sharing passwords, saying it doesn’t serve well for families with kids in college, for example. However, Netflix doesn’t seem likely to change, so the choice is to give up Netflix – or pay the fee to share.